Qwest is “on the hunt for more data centers,” according to an article in the Denver Post (link via John Rath), which says the regional telco is also looking for hosting companies to acquire. Denver-based Qwest has 14 data centers in 11 cities, and is seeing growth in its managed hosting business, traditionally the most profitable sector of the hosting industry.
The article looks at Qwest’s strategy, but also explores investor interest in acquiring data centers, and the questiohn of whether the best value proposition is to acquire facilities or hosting companies:
Data centers are attractive to private equity firms and companies such as Qwest because they offer predictable, sustainable cash flow, said Paul Stapleton, partner at DH Capital, an investment bank with dual headquarters in Boulder and New York. “Private merger and acquisition activity is very strong,” and public companies are becoming interested in hosting too, he said. “Everyone understands the value proposition now.”
The story notes that while it’s a sellers’ market for data centers, hosting assets can be acquired more cheaply, with some investment bankers in the sector estimating that shared hosting operations are currently selling for 1 times annual earnings. Many shared hosts operate out of colo space rather than their own data centers, while dedicated hosting firms are more likely to have their own facility.